January 12, 2010

Budget plan a wrinkle for districts

By BARBARA S. ROTHSCHILD
Courier-Post Staff

A state plan to cut school funding to help balance the New Jersey budget could have some districts scrambling if it goes through -- then again it may not affect some districts at all.

Districts it could hurt -- including those that have been diligently putting aside funds to offset possible tax increases in future years -- are crying foul and asking where the parity is in the plan.

State officials last month announced a plan to rebalance the state budget in part by cutting state aid to schools by $260 million. The move would require districts with surpluses exceeding 2 percent of their own budgets -- the maximum allowed by state law -- to tap the extra funds.

Administration officials said school programs, operations and local property taxes shouldn't be affected by the aid-for-surplus swap, but contention has been brewing because the plan would also force districts that have not followed the state's 2 percent cap to make cuts or raise school taxes.

"Districts that have been conservative in budgeting and spending could be the ones hurt the most," said James Devereaux, business administrator for the Cherry Hill School District. "If there was any hint whatsoever that the state might do something like this, we would most certainly have moved all of our projected excess surplus into capital reserve."

The district, Devereaux added, made a conscious and prudent decision to maintain "taxpayer relief" for the 2010-11 budget knowing future aid could be cut.

"If the state forces us to use the money we put aside for next year, they are changing the rules in midstream and digging a bigger budget hole for us next year," he said.

Through careful planning last year, Cherry Hill officials said they were able to reserve $5 million from the 2008-09 budget to support the current one and avoid an unrestricted surplus of more than 2 percent of the 2009-10 budget.

In so doing, the district was able to keep the tax levy stable for the current year. It is hoping to do the same as it builds next year's budget. The school board last year agreed to move $1 million into a capital reserve, but left the rest for taxpayer relief in 2010-11.

The ongoing plan was to earmark $3.5 million in excess surplus for taxpayer relief in 2010-11. Whether the money will still be there is now uncertain, and Devereaux is reacting in an attempt to stave off spending cuts as well as a tax hike.

"Just like last January, I am telling our staff, "If you haven't bought it yet, don't buy it,' " he said.

"The state is giving no incentive to be that conservative anymore," Devereaux added. "If you had anything more than the 2 percent (of surplus) on the books, the state has made that fair game. It will no longer be untouchable, no longer reserved for taxpayers."

Unlike Cherry Hill, whose state aid was flat last year, the Pennsauken School District received an unexpected windfall of an additional $2.3 million in state aid for 2009-10. The extra money allowed the district to increase its capital improvements for the current year. Now, the state could be poised to take some of that money back.

"I don't really know if the state understands school accounting," said Pasquale Yacovelli, Pennsauken's business administrator. "It's just devastating if this follows through."

Yacovelli said Pennsauken's state aid could be reduced beginning next month if the plan were to materialize. Its excess surplus of more than $6 million has been earmarked for the 2010-11 budget.

"The state is putting districts in a bind. They do it so late in the game. We're already halfway through the year. We would have to recoup from this year's appropriations -- and some of those (capital) projects are already started," he said.

Pennsauken has held its tax levy stable for three consecutive years. But doing it for a fourth year could be a challenge should the plan to cut state aid and tap excess surplus become a reality.

For now, the district -- which is trying to get a $34.6 million referendum approved this month to build a green school -- may have to place all capital projects on hold.

Devereaux said the governor's proposal would cause every school district to "spend down" to 2 percent of its operating budget, thus creating a huge disincentive for districts to conserve funds and implement multiyear budget strategies to lessen the taxpayer burden.

The issue could be moot if the incoming governor and Legislature decide to abandon the plan and devise a new strategy.

Lynne Strickland, executive director of the Garden State Coalition of Schools, noted that the plan was floated by the Corzine administration legislation.

"To date, no legislation has been introduced to support the proposal. GSCS is hearing it is "up in the air' and will not be addressed, at least not in this lame-duck session," Strickland said.

"There are clear problems with the proposal's approach. One is that approximately 40 percent of school districts (those that do not have excess surplus) will not be impacted; the 60 percent that could be affected will not be able to apply those monies to property tax relief as currently required by law," she said.

What the state might come up with in lieu of this plan is a big question mark.

But districts agree: Anything that takes away more school funding will not be good for public education.

Along with the state's huge financial hole that could affect school funding, another question mark involves federal stimulus money. In Cherry Hill, the 2009-10 school budget was buoyed by $1.3 million in stabilization aid. This year, with the federal budget deficit growing, that money could dry up, as well.

Other districts that were able to hold the line on the local tax levy for 2009-10, such as Mount Laurel, have adopted a "wait-and-see" position.

"We've really just begun our budget projections and we've been told we may not have any information on state aid until much later this year," said Marie Reynolds, spokeswoman for the Mount Laurel School District.

The uncertainty of a new state administration means yet another problem for school districts -- less time to sell their 2010-11 budgets to residents who are already tapped out.

"We're planning on our window being much smaller to get word out to the public. Our public hearing, budget adoption and the date of the vote will be so close that we may not be able to get out our usual budget newsletter in time," Reynolds said.

School elections are slated to be held on April 20 this year -- unless the new Legislature decides otherwise. But with a Republican governor and a Democratic Legislature, the public schools and their funding could become more of a political football than ever.

"Hopefully, good government will trump moodiness on the part of the Legislature," Strickland said. "You're talking about public education here. We need to remind legislators of that early and often."

Reach Barbara S. Rothschild at (856) 486-2416 or barothschild@camden.gannett.com